STATE OF KERALA Vs. KURIAN ABRAHAM P LTD

JUDGEMENT

(1.) Heard the Special Government Pleader for the State and counsel appearing for the respondent-assessee. Respondent is engaged in purchase of field latex and sale after converting it into centrifuged latex. Even though centrifuged latex is concentrated latex, processed and preserved, and is a value added product, the charging entry in the schedule of the Sales Tax Act provides for levy of tax on rubber in all it's forms referred therein at the last purchase point in the State. This is the position declared by the Supreme Court in assessee's case vide judgment reported in State of Kerala and Others v. Kurian Abraham Pvt. Ltd. and Another, 2008 3 SCC 582. However, since field latex is used in the production of centrifuged latex, and since the Division Bench of this Court in an earlier judgment held that both are different products, respondent voluntarily filed returns declaring tax liability on the purchase value of field latex and paid tax thereon. The centrifuged latex manufactured by the respondent was partly sold locally within the State without payment of tax as item is taxable at purchase point by the last purchaser and partly sold to dealers outside the State by paying tax under CST Act. Even though, taxable turn over was returned by the respondent on purchase of field latex and tax was remitted, the respondent claimed that the tax was remitted by mistake and claimed exemption based on the notification SRO No. 695/2003. Refund claimed was denied for the reason that the notification granting retrospective exemption specifically prohibits grant of refund of tax paid. Even though, first appeal was dismissed, the Tribunal on second appeal relying on the principles laid down by the Supreme Court in the case of Corporation Bank v. Saraswati Abharanasala and Another, 2009 1 SCC 540 ordered refund of the tax remitted by the respondent. It is against these orders, revisions are filed by the State for the years 1999-2000, 2000-2001, 2002-2003, 2003-2004 and 2004-2005. The Special Government Pleader appearing for the State produced a copy of SRO No. 123/2010 dated 02/02/2010 issued by the State subsequently with retrospective effect from 1st April, 1998 to 9th October, 2001, reaffirming the same view as in SRO No. 695/2003. According to the Government Pleader, this Government Order issued subsequently justifies reversal of Tribunal's order. After hearing both sides, what we notice is that the fundamental basis on which the Tribunal decided the issue based on the decision of the Supreme Court in Corporation Bank v. Saraswati Abharanasala and Another, is wrong. In this case, tax was paid by the respondent voluntarily and the tax paid is on raw material which normally goes to add to the cost of raw material and is passed on to customer along with product price. So much so, the tax remitted by the respondent on which refund is claimed is the tax collected when the product is sold as part of price. It is in this context only, the State has relied on the notification issued by the State namely, SRO No. 695/2003 to the effect that the tax paid on field latex which is raw material for the respondent should not be refunded. The counsel for the respondent contended that there is no separate collection of tax on purchase of field latex along with price. Of course, it is impossible for the product manufacturer to collect tax on purchase of raw material when commodity is taxable at purchase point. However the question is whether the tax on raw material namely, field latex is included in the product price and passed on to the customer. This is a matter to be seen by comparing the purchase price, cost of manufacturing and the product price. Normal accounting practice does not justify the manufacturer to fix the manufacturing cost without including tax component on raw material. However, if respondent is engaged in any other way of recouping tax on raw material, other than inclusion in the product price, they could be given an opportunity to establish before the officer by production of profit and loss account, balance sheet and pattern of recovery of tax on raw material.

(2.) Law settled by various decisions of Supreme Court such as Mafatlal Industries Ltd. v. Union of India and Others, 1997 5 SCC 536 and State of Maharashtra and Others v. Swanstone Multiplex Cinema (P) Ltd., 2009 8 SCC 235 is to the effect that refund of tax should not be granted if it results in unjust enrichment. In other words, if tax paid forms part of price and is passed on to the purchaser, then the respondent is not entitled to unjustly enrich them self by getting refund of tax remitted voluntarily that is passed on along with product price to the purchaser. In order to consider these matters, we remand these assessments to the Assessing Officer. Assessing authority shall specifically examine the scope of other notifications SRO Nos. 316/2005, 946/2007 and 123/2010 while deciding the matter. We allow the revisions by setting aside the orders of Tribunal and the First Appellate Authority and remand the matter to the assessing authority to re-consider the claim of the respondent for refund after giving an opportunity to the respondent to establish that tax paid on raw material is not passed on to the purchasers by including in the product price. The respondent shall produce a copy of this judgment before the assessing authority.